Analyst: Oz telco industry revenue growth to be in decline by 2016

The Australian telecommunications industry will have to brace itself for declining revenue growth by 2016 thanks to falling profitability of mobile services, according to analyst firm, Frost & Sullivan.

Annual mobile revenue growth rate expected to be less than one per cent for the next five years

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The Australian telecommunications industry will have to brace itself for declining revenue growth by 2016 thanks to falling profitability of mobile services, according to analyst firm, Frost & Sullivan.

Japan's biggest mobile operator, NTT Docomo, has already seen revenue dip 15 per cent in the past five years due to an oversaturated market. Frost & Sullivan ICT research industry manager, Marc Einstein.

The analyst firm released figures predicting mobile revenue rate to grow by less than one per cent -- 0.8 per cent to be exact -- every year for the next five years.

Einstein said this will probably move into a declining growth rate by 2016.

"The days of double digit growth rates are over for mobile services," he said.

Competition in the mobile telco space is expected to intensify, further driving down average revenue per user (ARPU) which has already been squeezed for some time.

Telcos are now forced to explore new product offerings and focus on driving up profitability.

With cloud computing set to continue its expansion into consumer and business industries it is no surprise telcos are investing in that space despite the slim margins.

Last year Telstra injected $800 million into its cloud business while Optus joined forces with Google to offer business cloud applications.

Impact of mobile data growth on telcos

Mobile data consumption is expected to skyrocket which is of particular concern in Australia since the country boasts one of the highest smartphone penetration rates in the world.

"The US has about 50 per cent smartphone penetration rate and even at that number the mobile networks can't deal with it," Einstein said. "Think about what is going to be like in three years when smartphone penetration is at 100 per cent."

A shortage of radio spectrum for mobile broadband services means Australian telcos will have to resort to more efficient technologies such as 4G LTE and shutting off older networks, such as 2G, to refarm spectrum.

The latter is likely to happen by 2016, according to Einstein, which may result in problems in extremely rural areas that still rely on older networks for communication.

"Also, depending on what happens to 4G because there are a lot of potential bands, telcos will have to deal with pretty expensive equipment for 4G peripheral for quite a while," he said. "Utilising fibre [networks] as much as possible makes a lot of sense given radio spectrum is a finite asset."

This would be music to the Federal Government's ears as the $36 billion National Broadband Network (NBN) which promises fibre-to-the-home (FTTP) to 93 per cent of premises.

The Coalition has consistently attacked the NBN with the Shadow Communications Minister, Malcolm Turnbull, regularly extolling the merits of a predominantly wireless broadband network.

Australia beats both the US and even Japan when it comes to smartphone penetration rates.

According to figures by Frost & Sullivan, Google's Android platform has now captured 49 per cent of smartphone market. Apple's iOS is now at 36 per cent while Blackberry is on a meagre 6.5 per cent.